During the presidential election campaign, Donald Trump promised to end taxation of Social Security benefits. Now, Republicans in Congress have introduced legislation that would make Trump’s idea a reality — with a twist.
Some experts have fretted about how eliminating taxes on benefits could undermine the financial foundation of the Social Security program. But it’s possible those fears are misplaced, given a provision of the bill designed to protect Social Security’s trust funds.
Here is a breakdown of the bill — including how Republicans intend to ensure the Social Security program doesn’t lose revenue as a result of the bill ending taxes on benefits.
How Social Security benefits are taxed
Throughout your working career, you have paid payroll taxes, which fund Social Security benefit payments to retirees.
Unfortunately, for millions of people, the taxes don’t end there. When you retire and start receiving benefits, up to 85% of your benefits can be subject to income tax.
What the government calls your “combined income” determines whether you owe income taxes on your benefits — and if so, how much. Your combined income is calculated by adding together:
- Your adjusted gross income
- Your nontaxable interest
- One-half of your Social Security benefits
As we explained in “7 Ways to Avoid Paying Taxes on Your Social Security Income“:
“If you file an individual tax return and your combined income is between $25,000 and $34,000, you may owe income taxes on up to 50% of your Social Security benefits. Earn more than that, and up to 85% of your benefits could be subject to taxes.
If you file a joint return and your combined income is between $32,000 and $44,000, you may owe taxes on up to 50% of your benefits. Earn more than that, and up to 85% could be taxable.”
Note that up to 85% of your income is subject to income tax. Some people mistakenly think that up to 85% of their benefits might actually disappear in the form of taxes, but that is not the case.
What the bill would change
Rep. Thomas Massie (R-Ky.) reintroduced the Senior Citizens Tax Elimination Act (H.R. 1040) in the House of Representatives on Feb. 6, and it had gained more than 30 cosponsors as of Feb. 18.
If passed and signed into law, the legislation would amend current tax law such that Social Security benefits are no longer included in gross income. In short, it would effectively end the federal income tax on benefits
As it’s currently written, the legislation would take effect the year after it’s signed into law. So, if it becomes law in its current form this year, no one would owe federal income taxes on their Social Security benefits starting with the 2026 tax year.
How the bill would work
During the election season, the biggest criticism of Trump’s promise to end taxes on Social Security benefits was that it would shortchange Social Security’s retirement trust fund — and thus future retirees. That’s because taxes on Social Security benefits go into that trust fund, which is used to pay Social Security retirement benefits.
In fact, an analysis by the nonprofit Committee for a Responsible Federal Budget found that ending federal income taxes on Social Security benefits would advance the insolvency date for Social Security’s retirement trust fund by more than a year. In other words, that trust fund would run dry — and future Social Security recipients would thus face potential benefit cuts — sooner than is currently projected.
But the Senior Citizens Tax Elimination Act has a solution for that.
The bill includes a “Social Security trust funds held harmless” provision. It calls for Treasury Department funds that haven’t already been earmarked for other purposes to be set aside to make up for the loss of tax revenue. Essentially, unused Treasury funds would be used to reimburse Social Security’s retirement trust fund for revenue it loses out on due to the repeal of taxes on Social Security benefits.
The provision even goes so far as to specify that Congress will not increase taxes in order to ensure Social Security trust funds are reimbursed. So, at least on paper, the Senior Citizens Tax Elimination Act would end taxes on Social Security benefits without risking benefit cuts for future retirees and without risking tax increases.
What happens next?
Once Massie’s bill was reintroduced, it was immediately sent to the House Committee on Ways and Means, which is the House’s tax-writing committee. That is where it remained as of Feb. 19.
The bill has a long way to go before it could become law. First, Ways and Means would have to vote to pass it. Then, the full House would have to vote to pass it.
At that point, it would move to the Senate. The Senate would have to vote on identical legislation and pass it before it would move to Trump, who could then sign it into a law.
The odds of all of that happening might appear good. Republicans control of both chambers of Congress and the White House, seemingly paving the way for passage.
But this is at least the fourth time Massie has reintroduced his bill — and before Massie took it up, then-Rep. Ron Paul sponsored the bill multiple times, going as far back as 2002. One of the previous attempts at passage was in 2017, when Republicans controlled both the White House and Congress. That doesn’t bode well for the bill’s chances of advancing in 2025.
Meanwhile, if you would like to keep tabs on the bill’s progress, follow its progress on the Library of Congress website. You can also weigh in with your feelings about the proposal by contacting your representative in the U.S. House of Representatives.
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